Variable costs be considered less risky than fixed costs

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Would you prefer investing in a company where you would get your money back at the end of the week or at the end of the month? Why?

Why might variable costs be considered less risky than fixed costs? (Fixed costs don’t change in relation to sales, so they still have to be paid, even if there is no income.) What happens if you don’t sell any cookies one month or sell only a hundred? The riskiness of fixed costs demonstrates why it’s a good idea for entrepreneurs to have a cash reserve in the bank equal to three months of fixed costs.

Reference no: EM132181602

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